On August 19, 2021, the U.S. Court of Federal Claims issued yet another decision rejecting the government’s effort to avoid responsibility for cleanup costs stemming from the plaintiff oil companies’ World War II-era, government-ordered production of aviation fuel. Chevron U.S.A., Inc. v. United States, No. 20-1784. This time, the government argued that the Court lacked jurisdiction over the dispute, and that plaintiff Texaco’s predecessor and the government entered into a mutual release foreclosing the instant liability.

The Court disagreed on both fronts. The jurisdictional issue was whether the oil companies stated claims under the Contract Settlement Act of 1944, or whether those claims were foreclosed when the Act was repealed in 2011. The Court explained that the repealer statute preserved all “rights and duties that matured, penalties that were incurred, and proceedings that were begun before the date of enactment of this Act.” Relying on the Federal Circuit’s August 4, 2021 decision rejecting this same argument, Shell Oil IV, __ F.4th __, 2021 WL 3377502, which we reported on here, the Court held that the oil companies’ were found liable under CERCLA in the 1990s, and so their right to reimbursement from the government “matured” 20 years before the repealer statute’s enactment. Thus, the Court had jurisdiction.

The government also argued the plaintiff Texaco’s predecessor-in-interest, Tide Water, entered into a mutual release with the government in 1949 concerning liability for the fuel production. One letter was the sole evidence of this alleged release, and it stated as follows: “It is therefore mutually understood as between the parties that [Tide Water] releases [the government] of any and all liability resulting from the termination of the aforesaid contracts[.]” The Court framed the issue as “whether a general release of liability can release a future claim that is not known, contemplated, or knowable at the time,” as the CERCLA statute, which provided the statutory basis for the oil companies’ liability, would not be passed for another 30 years. The Court surveyed precedent on releases of future liability and determined that a general release can only cover liability about which the releasing party has “knowledge of facts sufficient to constitute a claim” at the time of execution. It held that because CERCLA was not around then, Texaco could not have released claims under it.

The Court denied the oil companies a quick victory, however. They moved for summary judgment on the government’s obligation to indemnify them for $65 million in cleanup costs. But the Court denied this motion, holding that material issues of fact remained concerning the link between those costs and the contamination and production activities at issue. Thus, this litigation continues.

Share | Email| Print| Comments|  Topics: California, CERCLA, Cleanup, Court of Federal Claims, Oil and Gas, Remediation